Let Wizards Like Warren Buffett Pick Stocks for You

By James Altucher

A few years ago, hedge fund manager Phil Goldstein suggested in an SEC complaint that I was potentially trying to violate his constitutional rights. Hedge funds are required to reveal all of their stock positions on a quarterly basis and I would proceed to write articles about these positions. Goldstein felt this requirement violated his property rights. As evidence, Goldstein quotes me as writing: “I like learning from the stock picks and styles of others… Along these lines, I like looking at the 13F-HR.” Guilty!Oh, and by the way, you can fire them anytime you want and you pay them nothing. It’s not such a bad scenario if you can arrange it.

Imagine this scenario: Warren Buffett works for you. All day long he’s looking at stocks and showing you the ones he likes best. Some of them you buy, some of them you say, “Warren, go back to the drawing board on that one and work a little harder.” Then you turn to the guy in the cubicle next to Warren’s and you say, “Soros, show Warren how it’s done. Get me a few stocks I can buy today.”

Most of the superinvestors: Buffett, Soros, Carl Icahn, John Paulson, Mohnish Pabrai, Daniel Loeb, etc., publicly file every quarter all of their holdings, including stock holdings they added to, which stocks are new and which stocks they sold.

So instead of just buying SPY, or buying some mutual fund where we are paying enormous fees — or even worse, paying a scam hedge fund manager 20% of your profits (on the rare occasion when you get them) — how about if we just construct a portfolio of the brand new (or increasing) positions of the best investors. Diversify across investor. Diversify across industry. Keep position sizes small.

If Buffett likes a stock, what are you going to do? Argue with him?

Here are some of the new positions from a basket of the best investors:

According to his filings, in the past quarter. Buffett added positions to the following stocks:

Not so bad. With a few picks we got exposure to financials, health care, oil, retail, and the ever important trash category (not a year has gone buy in the past century where the trash collected wasn’t greater than the year before). And, even better, Warren Buffett has personally vouched for all these picks.

George Soros: Soros’s fund was up 28% last year. I wouldn’t mind scooping up some of the latest picks he’s adding to.

Emdeon (EM) – a health-care portal. A new position. Soros bought 5.6 million shares.
Suncor (SU) – Soros bought 2.6 million shares.
Ford (F) – Soros I guess vetted the car industry for us (he’s very good to us that way) and determined it was going to survive and bought over 7 million shares of Ford.
Wyeth (WYE) – another new position. Soros is steadily adding to the health-care space. He bought over 1 million shares.

If we want some foreign exposure for our portfolio lets look at Barton Biggs, Traxis Partners. Biggs was chief strategist over at a tiny boutique shop called Morgan Stanley before veering out onto his own and starting Traxis. His fund was up 38% last year.

Biggs, like Buffett and Soros, tends to be a global macro, big picture kind of guy. He wants to know where the world is heading and he puts his money there before the world catches us. Like the above two, he tends to be a long-term holder. Some of his recent new positions, all foreign plays, include: AMX, VALE, MTL, and PTR. Its hard enough to find stocks in the U.S., let alone in Mexico or other countries. That’s why I let Barton Bigg’s team of analysts do it for me while I sit at home in my pajamas.

In 2006 a multibillion-dollar hedge fund offered to let me manage $100 million with the strategy of piggybacking the best investors. I considered it but they wanted me to hedge each position with a short and they also wanted me to stop all writing. I didn’t want to do either of those so instead I started a Web site that allowed anyone to piggyback the greats. It worked out well for me. It’s a strategy that works, particularly when compared with other long-only strategies, and I’ve traded it for my own account successfully.

James Altucher is a managing partner of Formula Capital, an alternative asset management firm, and an author on investment strategies. Unlike Dow Jones reporters, he may have positions in the stocks he writes about.

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The Wealth Manager blog looks at issues that matter to wealth managers, financial planners and other investment professionals. It offers a sampling of the insights, advice and other coverage available at Wealth Management, a new specialized section of wsj.com that is led by editors Kevin Noblet and Patrick Graham. Visit the section here. Wealth Management publishes a newsletter, Morning Call, that provides a daily summary of items of interest to financial advisers. Sign up for Wealth Management’s Morning Call here. Write to us at wealthmanagerinquiries@dowjones.com.